Policy Forum: The GST/HST Obligations of Non-Resident E-Commerce Firms—Jurisprudence and Policy

E-commerce presents a broad range of challenges for policy makers. In the tax context, it has the potential to obscure the relationship between a firm and the appropriate taxing jurisdiction. This article explores the goods and services tax (GST)/harmonized sales tax (HST) obligations of non-resident e-commerce firms with no physical presence in Canada—specifically, whether those firms may be required to register for, collect, and remit GST/HST in respect of their activities in the Canadian market. Recent developments in the common law (albeit in a non-tax context) indicate that non-resident e-commerce firms with no physical presence in Canada may be found to be carrying on business in Canada. Since carrying on business in Canada is a key element in determining a person's GST/HST obligations, it is likely that non-resident e-commerce firms that are found to meet the requirement will be subject to such obligations in respect of taxable supplies made digitally in the Canadian market. That said, there is at present a great deal of uncertainty about the specific factors to be used in determining whether the activities of a non-resident e-commerce firm are sufficient to meet the carrying-on-business threshold. The author of this article recommends that Parliament should address this uncertainty by amending the Excise Tax Act to deem non-resident e-commerce firms to be carrying on business in Canada if they exceed specific de minimis sales thresholds.